The Long View: Debt and Demographics

I’m very excited to be here actually to discuss this, because we do oftentimes spend so much time talking about the short term. Since the financial crisis of 2008, we’ve also spent a lot of time talking about these longer-term, thematic trends that I find fascinating, and the key I think to helping our clients make money is, How do we create the narrative around all of those issues? But the first thing is the debt dynamics of the world. And again, post-financial crisis, we’ve had just an enormous amount of debt issued.

ERIC WINOGRAD

And you’re exactly right, Doug. It is true there’s been a large amount of US sovereign debt in particular issued. But when we look at a country like China, for example, we see debt dynamics that are, if anything, even a bit more dramatic than what we’ve seen in the United States. And so the debt overhang, as we like to talk about it, is a global phenomenon, and it’s one of the variables that we look at with a long-term time horizon. Because it has implications for long-term growth. Put simply, when you borrow money today, particularly as a sovereign, what you are doing is trying to boost growth in the short term at the expense of growth in the long term.

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